Unveiling the Mechanisms and Spatial Spillovers of Digital Finance in Enhancing Urban Green Efficiency

The rapid advancement of digital finance has emerged as a crucial driver of sustainable urban development, yet its impact on green total factor productivity (GTFP) remains underexplored.This study investigates the mechanisms through which digital finance influences GTFP and examines its spatial spillover effects within Chinese prefecture-level cities. Utilizing panel data from 278 cities spanning 2011 to 2021, the Digital Financial Inclusion Index and an urban GTFP measurement framework are employed to conduct a dynamic analysis.The findings reveal that digital finance facilitates GTFP growth primarily through three channels: fostering technological innovation, promoting industrial upgrading, and mitigating resource misallocation.Significant regional heterogeneity is observed, with the impact being more pronounced in central and western China compared to the eastern region.Moreover, cities with lower levels of financial development experience a stronger enhancement in GTFP through digital finance than their more financially developed counterparts.A temporal analysis further indicates that the green efficiency effect of digital finance has intensified over time.Employing a Spatial Error Model (SEM), robust evidence of significant spatial spillover effects is identified, demonstrating a clustering pattern in regional green efficiency improvements.These findings underscore the need for tailored policy interventions to optimize the role of digital finance in promoting sustainable urban development.Policy recommendations include enhancing financial accessibility in underdeveloped regions, strengthening technological diffusion, and fostering coordinated regional green development strategies.